Designing and scaling up nature-based markets

In this Policy Insight, drawn from the 2025 Paris Report, the authors argue for a new approach to finance nature-based provision of carbon and biodiversity benefits: one that takes shares in projects as the main asset to be traded, rather than credits. In our mechanism, jurisdictions propose nature-positive large-scale projects. Investors buy shares in these projects. Shares do not affect land ownership but produce carbon and biodiversity dividends. Prices in the primary market are used to pin down investor preferences over project attributes and generate conversion rates for different projects in the secondary market, thereby fostering liquidity for investors. Compared to existing credit-based approaches, our mechanism accounts for the unavoidable non-permanence of forests and fosters long-term thinking for market participants. Additionally, our mechanism lowers transaction costs, encourages additionality, and reduces leakage. The Insight proposes several venues to support demand for this new market and discuss options available to adapt the mechanism to pure conservation projects, which are essential but less amenable to be turned into dividend-producing assets because they generate lower climate and biodiversity flow benefits.